In January of 2012 I identified 8 investments with growth potential directly related to the price and scarcity of water. We have been following them for years now and 2015 has been another good year for most of these water stocks. Year to date the Dow Jones Industrial Average is virtually unchanged for the year. The Nasdaq and S & P 500 are also virtually unchanged for the year. Let’s take a look at how the companies (associated with water) I identified in January 2012 performed.
- American Water Works Co. Inc. (NYSE: AWK): This stock was up 8.4% in 2015. Its closing price yesterday was 57.76. This stock is up over 125% during the last 5 years. I’m not sure where else we could have found such good gains in the past five years in such a conservative industry. American Water Works provides water and wastewater services to 15 million people in 30 U.S. states and parts of Canada.
- Aqua America Inc. (NYSE: WTR): Gained 10% this year. It closed at 29.35. Aqua America is a holding company for a group of regulated utilities serving 3 million customers in 13 states ranging from Texas to Maine. This is almost a 70% return for the past five years that keeps it tracking ahead of the Dow Jones Industrial Average for the same time period. During this time the Dow was up 55%.
- California Water Service Group (NYSE: CWT): This water company is a utility that serves California, Washington, New Mexico, and Hawaii, and American States Water Co. This stock is an example of there is no such thing as a sure thing. Last year it was the one under performer in the group down 8.5%. Over the last 5 years it has only gained 20%. In 2015 California Water Service Group learned first hand what the drought in California means for revenue. A large majority of their revenue comes from states hit hard with drought while their operating expenses rose slightly, with higher labor costs, drought program and conservation expenses.
- American States Water Company (NYSE: AWR): This California-based utility provides water, electric, and contracted services in the United States. In 2015 it rose 22%, closing at 41.83 yesterday. During the past five years this stock is up 144%. It is the best performer of the group and is diversified across the United States.
Exchange traded funds or ETFs
Another option is to invest in water Exchange Traded Funds (ETF). Think of an exchange-traded fund as a mutual fund that trades on a public exchange, like the New York Stock Exchange. You get the diversification of a fund with the added benefit of the liquidity of a public exchange.
Below is the past performance of a few of the popular water ETFs:
- PowerShares Global Water Portfolio (PIO): This ETF is based on the Palisades Global Water Index. It focuses on companies providing potable water. The year the ETF was down 8% closing at 21.52 yesterday. For the past five years it is up 11%.
- PowerShares Water Resources Portfolio (PHO): The largest Water ETF with more than $1 billion in assets. It also invests in companies providing potable water. In 2015 it was down 13%, closing at 22.14. The funds performance over the past five years has been up 16%.
- Guggenheim S&P Global Water Index ETF (CGW): This ETF corresponds to the S&P Global Water Index. This ETF is the first US listed global Water ETF. It was up about 1% in 2015 closing at 28.72. For the past five years it has gained 40%.
- First Trust ISE Water Index Fund (FIW): Focuses on companies with waste water and potable water direction. It is down 6% this year and for the past five years is up 41% . As you can see 2015 was a mixed year for the stock market and water stocks. The ETFs did not perform well while 3 of 4 water stocks out performed the market. Looking at the five-year performance the Dow was up 58%. During the same time period AWK and AWR had gains of 125% and 144% respectively. FIW was up 41%, PHO up 16%, CGW up 40%, CWT up 20% , WTR up 70% and PIO up 11%.
Please do not take any of the information on this post as a recommendation to buy the stocks or ETFs. This is simply an attempt to start a meaningful
conversation on the blog about investing in water. What do you think is in store for the stock market and water stocks in 2016?
If you enjoyed this article please consider following me @H2oTrends.